More than two years after Wall Street’s closest brush with death since the Great Depression, taxpayers, investors and voters are still waiting for the kind of bare knuckles Congressional action like the Pecora Hearings in the 1930s that resulted in federal legislation creating basic firewalls within the banking industries.

For more on this, read Pam Martens’ terrific piece in CounterPunch, “The Most Vital Ingredient in Wall Street Reform Goes Missing“. This morning’s Miami Herald shows the cracks in the wall: on the one hand reporting the Rooms-To-Go economy as showing new signs of life, and on the other, Miami’s closest connection to the Wall Street crisis: LNR, managing nearly $22 billion in troubled commercial backed mortgages.

Lennar and LNR were founded by the Miller family in Miami whose good works and contributions include generous gifts to the University of Miami School of Medicine and other local charities (except, naturally, for the environment). Both companies reach far beyond Miami’s parochial politics. Lennar is one of the nation’s largest production homebuilders. Its serial projects in South Florida to move sprawl outside the Urban Development Boundary (Parkland, Florida City Commons) provoke the ire of conservationists struggling to protect national parks. To Lennar and Wall Street, these tempests amount to less than rounding errors on the corporate balance sheet.

Small as they are, those rounding errors do add up. They add up to deforming democracy. The distortions at County Hall through land use zoning and permitting facilitates a well-mannered segregation of citizens from their government, the peddling of influence by the lobbyist corps and the engineering cartel puts ordinary voters at a further distance. In Miami-Dade, Florida’s largest and most politically influential county, every effort at reform of the land use pattern that wraps up sprawl and overdevelopment has been thwarted and suppressed, despite the economic collapse. One county commissioner, Joe Martinez, directly benefited from an insider transaction on a lot owned and platted originally by Lennar.

Production homebuilders form their own cartel across the nation, teaming up with local players, partnering in land aggregation for example or the intermediate stages of large-scale development that wrap up millions of dollars in fees and influence peddling at the lowest rungs of government related to zoning and permitting and councils. Commissioner Martinez, for instance, obtained his lot for his dream house from a builder and former president of the Latin Builders Association who teamed with Lennar in one of its subdivision developments. (The local Lennar vice president, Anthony Seijas, is recent past president of the Latin Builders and now an executive in a Lennar subsidiary specializing in distressed real estate investments.)

The Miller family, through ownership of LNR, also invests in another side of the development equation; gambling the arbitrage between distressed debt and its value as a “workout” asset. In playing both the long and short sides of the development equation on a national scale the largest shareholders of Lennar and LNR have a unique play on the financial markets. That play, however, is not agnositic. It is based on optimism that growth of construction and development, in huge increments and pools of mortgages measured in the hundreds of millions, will never stay down for long.

The time release depression has allowed companies like Lennar and LNR to hold out for sunnier days with crutches unavailable to consumers and small businesses. Lennar and LNR are part of a network of large financial institutions that lobbied expensively and extensively for the prerogatives of the “free market” over many decades. The visible benefits include a provision supported by the Obama White House in 2009 legislation that allows homebuilders to write off current losses– billions– against profits during the building boom. LNR, like most of Wall Street, is surviving through an accounting rule change recently approved by Congress that gives the nation’s largest financial institutions (ie. the issuers of debt owned by LNR and owed by Lennar) the flexibility to price their balance sheets as though a 30 to 50 percent devaluation of assets has not occurred.

This is not the place to argue whether enforcing the mark-to-market rule — or just to shrug and let it go– would have resulted in 25 percent unemployment throughout the United States, but there is no question that the fundamental characteristic of the time-release depression is precisely to allow the big recipients of debt to survive and not collapse. That’s Plan A. The problem: there is no Plan B.

If Congressional hearings on financial regulations only reinstitute the firewalls that once protected depositor institutions from speculative investment banks, the opportunity to cure the deep, underlying distortions of democracy that have grown out of the dependence of the economy on collateralized debt and other forms of financial derivatives will be missed. It is critical not just to regulate the markets for that debt, to provide for clear transparency in valuations, but also to integrate how communities choose to grow and to re-balance democracy in favor of citizens and taxpayers so that power and wealth is not so concentrated behind closed doors.

Those closed doors mesh with Wall Street’s. It is said we can’t open them, because otherwise we risk another Great Depression. Where we are, today, may get us to the same place– only slower. The mainstream media is proving an unreliable guide for the underlying cause of this time-release depression. One can’t build an economy of Potemkin Villages based on Rooms-To-Go advertisements without a day of reckoning. That goes equally for the overdevelopment of downtown Miami– a sinkhole for billions of collateralized mortgage bonds– as for suburban sprawl near the Everglades and the billions of taxpayer dollars to correct past mistakes.